The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) has while dismissing the appeal held that Tax Deduction at Source shall not be applicable to trade discount to customers.
Konda Srinivasaiyer assessee, an individual is engaged in the business of wholesale trading business, filed his return of income and the assessment has been completed u/s. 143(3) of the Act, and determined total income by making addition towards cash deposits u/s. 68 r.w.s. 115BBE of the Act and also disallow 50% of sale promotional expenses. The case has been subsequently taken up for revision and taken up the issue of cash discount and turnover discount allowed by the assessee in light of provisions of section 194C r.w.s. 40(a)(ia) of the Act.
In revision proceedings it was held that although the assessee had allowed cash discount and turnover discount, but failed to deduct TDS under Section 194C of the Act. And set aside the assessment order passed by the AO under Section 143(3) of the Income Tax Act, and directed the AO to redo the assessment after making necessary enquiries with regard to the issue of applicability of TDS provisions.
B. Ramakrishnan, on behalf of the assessee submitted that the assessment order was neither erroneous nor prejudicial to the interests of the revenue. He further submitted that referring to copy of ledger account on trade discount allowed to customers submitted that discount allowed to customers in each case was less than Rs. 30,000/- and aggregate amount of discount allowed to customer was less than Rs. 1 lakh and thus, the same was outside the scope of section 194C of the Act.
S. Senthil Kumaran,on behalf of the revenue submitted that assessee initially had claimed that it was incentive paid to customers, but subsequently changed his stand and argued that it was trade discount.Trade discount allowed to customers and the assessee had specified the trade discount in the invoice, then question of application of provisions of section 194C of the Act never arise.
He further submitted that AO had failed to carry out required enquiries he ought to have carried out which rendered the assessment order to be erroneous and prejudicial to the interests of the revenue.
The Chennai Bench of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member) dismissed the appeal observing that, “the assessee changed his stand and argued it is trade discount and it is outside the scope of section 194C of the Act. If at all it is trade discount, the assessee should prove his claim with relevant material including sales invoice to prove that trade discount has been allowed to customers in the invoice itself. But no such details have been furnished before us.”
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